TECHNICLONE CORP/DE/, DEFR14A, 1998-09-09

TECHNICLONE CORP/DE/
DEFR14A, 1998-09-09
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement

[ ] Definitive Proxy Statement

[X] Definitive Additional Materials

[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12

TECHNICLONE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

TECHNICLONE CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.

[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*

- --------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.

[ ] Fee previously paid by written preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement No.:

- --------------------------------------------------------------------------------

(3) Filing Party:

- --------------------------------------------------------------------------------

(4) Date Filed:

- --------------------------------------------------------------------------------
NOTES:
<PAGE> 2

TECHNICLONE CORPORATION
14282 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780-7017
(714) 508-6000
------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 13, 1998

NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
TECHNICLONE CORPORATION, a Delaware corporation (the "Company"), will be held at
The Atrium Hotel, 18700 MacArthur Boulevard, Irvine, California 92612 on October
13, 1998, at 10:30 A.M., Pacific Time, for the following purposes, as more fully
described in the accompanying Proxy Statement:

(1) To elect the following six (6) nominees to serve as directors until the
next annual meeting of stockholders or until their successors are
elected and have qualified:

<TABLE>
<S> <C>
Larry O. Bymaster Carmelo J. Santoro, Ph.D.
Rockell N. Hankin Clive R. Taylor, M.D. Ph.D.
William C. Shepherd Thomas R. Testman
</TABLE>

(2) To approve issuance of Common Stock pursuant to a $20,000,000
equity-based line of credit, to the extent such issuance could result
in the Company's issuing more than twenty percent (20%) of the issued
and outstanding Common Stock of the Company as of September 2, 1998, as
such approval is mandated by the corporate governance requirements of
the Nasdaq Stock Market; and

(3) To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ended April 30, 1999; and

(4) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.

Only stockholders of record at the close of business on September 2, 1998,
will be entitled to vote at the meeting or any adjournment or postponement
thereof.

By Order of the Board of Directors

Elizabeth A. Gorbett-Frost,
Secretary

August 17, 1998

PROXY ATTACHED. YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY. Any stockholder present at the meeting may withdraw his or her proxy and
vote personally on each matter brought before the meeting. Stockholders
attending the meeting whose shares are held in the name of a broker or other
nominee who desire to vote their shares at the meeting should bring with them an
original proxy or letter from that broker or other nominee confirming their
ownership of shares and to provide evidence of whether such stockholders have
voted previously at this meeting.
<PAGE> 3

TECHNICLONE CORPORATION
14282 FRANKLIN AVENUE
TUSTIN, CALIFORNIA 92780-7017
------------------------

PROXY STATEMENT
------------------------

THIS PROXY MATERIAL IS FIRST BEING MAILED TO STOCKHOLDERS
ON SEPTEMBER 8, 1998
------------------------

ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 13, 1998
------------------------

INTRODUCTION

This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of TECHNICLONE CORPORATION, a Delaware
corporation ("Techniclone" or the "Company"), for use at its 1998 Annual Meeting
of Stockholders to be held on October 13, 1998, at 10:30 A.M. at The Atrium
Hotel, 18700 MacArthur Boulevard, Irvine, California 92612.

This Proxy Statement and the accompanying BLUE PROXY CARD are being mailed
to shareholders on or about September 8, 1998. The Company has retained the
services of Corporate Investor Communications, Inc. ("CIC") to assist in
soliciting proxies from brokers and nominees for the Annual Meeting. The
estimated costs for these services is approximately $15,000 and will be borne by
the Company. These costs exclude salary and other incidental cost normally
expended for solicitation of this proxy by officers and employees. It is
contemplated that this solicitation of proxies will be made exclusively by mail;
however, if it should appear desirable to do so in order to ensure adequate
representation at the meeting, CIC, directors, officers and employees of the
Company may communicate with stockholders, brokerage houses and others by
telephone, telegraph or in person to request that proxies be furnished and may
reimburse banks, brokerage houses, custodians, nominees and fiduciaries for
their reasonable expenses in forwarding proxy materials to the beneficial owners
of the shares held by them. All expenses incurred in connection with this
solicitation shall be borne by the Company.

Holders of shares of Common Stock of the Company ("stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary
of the Company, 14282 Franklin Avenue, Tustin, California 92780-7017, in writing
prior to or at the meeting or by attending the meeting and voting in person. Any
stockholder, who holds stock in the name of a broker or other nominee, who
desires to revoke a previously executed proxy or vote in person at the meeting
must furnish or bring with them an original proxy, if such person has not yet
voted at this meeting, or a copy of any proxy previously voted. A proxy, when
executed and not so revoked, will be voted in accordance with the instructions
given in the proxy. If a choice is not specified in the proxy, the proxy will be
voted "FOR" the nominees for election of directors named in this Proxy Statement
and "FOR" the approval of the issuance of Common Stock of the Company pursuant
to a $20,000,000 equity line of credit, to the extent such issuance could result
in the Company's issuing more than twenty percent (20%) of the issued and
outstanding Common Stock of the Company as of September 2, 1998, as such
approval is mandated by the corporate governance requirements of the Nasdaq
Stock Market.

VOTING SECURITIES

The Company has two classes of securities outstanding, common stock and
preferred stock, however only the common stock (the "Common Stock") is entitled
to vote at the meeting. Holders of Common Stock of the Company of record as of
the close of business on September 2, 1998 (the "Record Date"), will be entitled
to vote at the meeting or any adjournment or postponement thereof. As of August
7, 1998, there were
<PAGE> 4

66,304,258 shares of Common Stock outstanding and entitled to vote. Each holder
of shares of Common Stock is entitled to one vote for each share of Common Stock
held as of the Record Date. Abstentions and broker non-votes are each included
in the determination of the number of shares present and voting for the purpose
of determining whether a quorum is present. Under Delaware law, the six (6)
nominees receiving the highest number of votes will be elected as directors at
the Annual Meeting. As a result, proxies voted to "Withhold Authority," which
will be counted, and broker non-votes, which will not be counted, will have no
practical effect. Under the General Corporation Law of the State of Delaware,
with respect to votes cast on matters other than the election of directors that
require the affirmative vote of a majority of the shares present and voting at
the annual meeting, or the affirmative vote of a majority of the outstanding
shares, abstentions and broker non-votes will have the same effect as votes
against a proposal.

Stockholders are not entitled to cumulate their votes in the election of
directors.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

Set forth below is certain information as of August 7, 1998, regarding the
beneficial ownership of the Company's Common Stock by (i) all directors and
director nominees, (ii) each of the Named Officers identified in the Summary
Compensation Table, and (iii) all current directors and executive officers as a
group. No person, other than Edward J. Legere II, was known by the Company to
own more than five percent (5%) of the voting securities of the Company.

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS SHARES (A) CLASS (B)
------------------------------------ -------------- ---------- ------------
<S> <C> <C> <C>
Thomas R. Testman................................. Common Stock 75,000(C) 0.11%
14282 Franklin Avenue
Tustin, California 92780
Larry O. Bymaster................................. Common Stock 250,000(D) 0.36%
14282 Franklin Avenue
Tustin, California 92780
Rockell N. Hankin................................. Common Stock 62,500(E) 0.09%
14282 Franklin Avenue
Tustin, California 92780
Edward J. Legere II............................... Common Stock 3,632,626(F) 5.23%
14282 Franklin Avenue
Tustin, California 92780
Carmelo J. Santoro, Ph.D. ........................ Common Stock 197,500(G) 0.28%
14282 Franklin Avenue
Tustin, California 92780
William C. Shepherd............................... Common Stock 0 0%
14282 Franklin Avenue
Tustin, California 92780
Lon H. Stone...................................... Common Stock 1,229,911(H) 1.77%
14282 Franklin Avenue
Tustin, California 92780
Clive R. Taylor, M.D., Ph.D....................... Common Stock 925,000(I) 1.33%
14282 Franklin Avenue
Tustin, California 92780
David Allen, Ph.D................................. Common Stock 56,000(J) 0.08%
14282 Franklin Avenue
Tustin, California 92780
Kenneth Berger, Ph.D.............................. Common Stock 151,785(K) 0.22%
14282 Franklin Avenue
Tustin, California 92780
Elizabeth A. Gorbett-Frost........................ Common Stock 225,576(L) 0.32%
14282 Franklin Avenue
Tustin, California 92780
William V. Moding................................. Common Stock 496,100(M) 0.71%
14282 Franklin Avenue
Tustin, California 92780
</TABLE>

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<PAGE> 5

- ---------------
(A) Except as otherwise noted below, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock,
shown as beneficially owned by them, subject to community property laws
where applicable.

(B) Percentages for the Common Stock computed on the basis of 66,304,258 shares
outstanding at August 7, 1998, plus an additional 3,194,218 shares that
could be acquired by director nominees and Named Officers through exercise
of stock options and warrants during the 60 day period ending October 7,
1998.

(C) Includes 50,000 shares purchased under an option agreement on July 15, 1998
for $.60 per share and 25,000 shares issued by the Company in exchange for
consulting services rendered to the Company for the three months ending
August 31, 1998.

(D) Includes 250,000 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 7, 1998.

(E) Includes 62,500 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ending October 7, 1998.

(F) Includes 3,123,333 shares owned by Legere Enterprises, Ltd., a Nevada
limited partnership owned by Mr. Legere and members of his family, 500,000
warrants owned by Biotechnology Development, Ltd., a limited partnership
controlled by Mr. Legere, granted in conjunction with a line of credit
agreement with the Company in April 1998, and 9,293 shares of Common Stock
subject to outstanding stock options exercisable during the 60 day period
ending October 7, 1998.

(G) Includes 187,500 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 7, 1998.

(H) Includes 230,000 shares owned by members of Mr. Stone's family as to which
he may be deemed to be the beneficial owner. Also includes 822,333 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 7, 1998.

(I) Includes 42,000 shares owned by members of Dr. Taylor's family as to which
he may be deemed to be the beneficial owner. Also includes 757,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 7, 1998.

(J) Includes 55,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ending October 7, 1998.

(K) Includes 151,250 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 7, 1998.

(L) Includes 20,168 shares owned by members of Ms. Gorbett-Frost's family as to
which she may be deemed to be the beneficial owner. Also includes 134,342
shares of Common Stock subject to outstanding stock options and warrants
exercisable during the 60 day period ending October 7, 1998.

(M) Includes 20,000 shares owned by members of Mr. Moding's family as to which
he may be deemed to be the beneficial owner. Also includes 240,000 shares of
Common Stock subject to outstanding stock options exercisable during the 60
day period ending October 7, 1998.

(N) Includes 25,000 shares of Common Stock subject to outstanding stock options
exercisable during the 60 day period ending October 7, 1998.

(O) Includes the securities described in notes (C), (D), (E), (F), (G), (H),
(I), (J), (K), (L), (M) and (N).

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<PAGE> 6

PROPOSAL ONE

ELECTION OF DIRECTORS

Directors are elected at each annual stockholders' meeting to serve until
the next annual meeting or until their successors are elected. The Board of
Directors proposes the election of six (6) directors at the Meeting. Unless
authority to vote for directors has been withheld in the proxy, the persons
named in the enclosed proxy intend to vote at the Meeting FOR the election of
the nominees presented below. Under Delaware law, the six (6) nominees receiving
the highest number of votes will be elected as directors at the Meeting. As a
result, proxies voted to "Withhold Authority," which will be counted, and broker
non-votes, which will not be counted, will have no practical effect.

With the exception of Larry O. Bymaster, Rockell N. Hankin, William
Shepherd and Thomas R. Testman, each of the nominees is an incumbent director
elected at the last annual meeting of stockholders. Each of the nominees has
consented to serve as a director for the ensuing year. If any nominee becomes
unavailable for any reason before the election, then the enclosed proxy will be
voted for the election of such substitute nominees, if any, as shall be
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will become unavailable to serve.

The names and certain information concerning the persons to be nominated
for election as directors are set forth below. YOUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.

NOMINEES

The following table sets forth the names and certain share ownership
information as of August 7, 1998, regarding the persons to be nominated for
election as directors of the Company:

<TABLE>
<CAPTION>
DIRECTOR NUMBER OF TITLE PERCENT OF
NAME AND POSITION AGE SINCE SHARES(A) OF CLASS CLASS(B)
----------------- --- -------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Thomas R. Testman...................... 61 06/03/98 75,000(C) Common Stock 0.11%
Chairman of the Board
Larry O. Bymaster...................... 56 06/03/98 250,000(D) Common Stock 0.36%
President, Chief Executive
Officer and Director
Rockell N. Hankin...................... 51 11/19/97 62,500(E) Common Stock 0.09%
Director
William C. Shepherd.................... 60 09/08/98 0 Common Stock .00%
Carmelo J. Santoro, Ph.D. ............. 57 09/27/96 197,500(F) Common Stock 0.28%
Director
Clive R. Taylor, M.D., Ph.D. .......... 54 11/02/88 925,000(G) Common Stock 1.33%
Director
</TABLE>

(D) Includes 250,000 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 7, 1998.

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<PAGE> 7

(E) Includes 62,500 shares of Common Stock subject to outstanding stock options
exercisable during the 60 days period ending October 7, 1998.

(F) Includes 187,500 shares of Common Stock subject to outstanding stock
options exercisable during the 60 day period ending October 7, 1998.

(G) Includes 42,000 shares owned by members of Dr. Taylor's family as to which
he may be deemed to be the beneficial owner. Also includes 757,000 shares
of Common Stock subject to outstanding stock options exercisable during the
60 day period ending October 7, 1998.

Thomas R. Testman has served as a director of the Company since June 3,
1998. Mr. Testman is a member of the Executive, Audit and Current Special
Committees of the Company, and recently served as interim Chief Executive
Officer of the Company. Mr. Testman retired from his position as Managing
Partner with Ernst & Young, an international auditing, accounting and consulting
services firm in October 1992 after 30 years of continuous service. During his
tenure, he held the position of National Director of Management Consulting
Services, served on the operating committee of the firm from 1976 to 1980, was
Western Regional Director of Health Care Services and engaged in management
consulting during various periods. Mr. Testman sits on the board of directors of
MiniMed, Inc., which designs, develops, manufactures and markets advanced
microinfusion systems for delivery of a variety of drugs, with a primary focus
on the intensive management of diabetes. He also formerly served as a director
of Nichols Institute, a publicly-held laboratory company that was sold to
Corning, Inc. in 1994. He currently also serves as a director of six privately
held health care companies. Mr. Testman is Chairman of the Executive Committee
of the Board.

Larry O. Bymaster has served as a director of the Company since June 3,
1998. He was named the President and Chief Executive Officer of the Company on
May 18, 1998. Mr. Bymaster is a member of the Current Special Committees of the
Company. Prior to joining Techniclone, Mr. Bymaster was Chairman of the Board,
President and Chief Executive Officer of Pacific Pharmaceuticals, Inc. (formerly
Xytronyx, Inc.) which develops and commercializes cancer therapeutic and
diagnostic products from 1990 to April 1998. Mr. Bymaster has over 25 years
experience in the biotechnology and business fields. Prior to Pacific
Pharmaceuticals, Inc., Mr. Bymaster held senior management positions with
Cytotech, a biotechnology company, Baxter Healthcare and Dart Industries. Mr.
Bymaster is also a member of the Board of Directors of a privately held medical
device company.

Rockell N. Hankin has served as a director of the Company since November
19, 1997. Mr. Hankin is a member of the Executive, Compensation and Current
Special Committees of the Company. Mr. Hankin is the Chief Executive Officer of
Hankin & Co. and Hankin Investment Banking, a consulting firm and an investment
banking firm, respectively. Mr. Hankin is also the Vice Chairman of Semtech
Corporation, which manufactures electronic components and a Director of Alpha
Microsystems, which is a supplier of information technology services and
products. Mr. Hankin serves as a director of several privately held companies.
Mr. Hankin is the Chairman of the Compensation Committee and Current Special
Committees of the Board.

William C. Shepherd has served as a director since September 8, 1998. Mr.
Shepherd was the Chairman of the Board of Allergan Inc. from January 1, 1996
through December 31, 1997 and was the Chief Executive Officer of Allergan Inc.
from 1992 through 1997. Currently Mr. Shepherd serves on the Board of Directors
of Furon Company. Mr. Shepherd previously served on the Board of Directors of
Ligand Pharmaceuticals, Inc. from 1992 through 1997 and Allergan-Ligand
Retinoids Therapeutics from 1995 through 1997.

5
<PAGE> 8

Carmelo J. Santoro, Ph.D. has served as a director of the Company since
September 27, 1996. Dr. Santoro is a member of the Executive and Compensation
Committees of the Company. Dr. Santoro has served as the Chief Executive Officer
of Platinum Software Corporation from April 1994 through March 1996 and as Chief
Executive Officer of Silicon Systems, Inc. from January 1981 through March 1993.
From 1980 to 1982, Dr. Santoro was Vice President of Integrated Circuits at the
Solid State Division of RCA. Dr. Santoro serves as a director of Dallas
Semiconductor Corporation, S3, Inc. and several privately held companies.

Clive R. Taylor, M.D., Ph.D. has served as a director of the Company since
November 2, 1988. Dr. Taylor is a member of the Compensation Committee of the
Company. He is professor of pathology at the University of Southern California
and Chairman of the Department of Pathology. Currently, Dr. Taylor serves as an
Associate Director of Laboratories for the Los Angeles County Medical Center and
is on the attending staff of the Kenneth Norris, Jr. Cancer Hospital and
Research Institute. Dr. Taylor also serves as director on three privately held
companies. He received his M.D. degree from Cambridge University and his Ph.D.
from Oxford University and is board certified by the American Board of Pathology
in Anatomic and Clinical Pathology.

Directors are elected on an annual basis. The present term of office for
each director will expire at the next annual meeting of Techniclone's
stockholders, or at such time as his successor is duly elected. Directors do not
receive separate cash compensation for fulfilling their duties as directors of
Techniclone. There are no family relationships among Techniclone's officers and
directors.

The Board of Directors of the Company held 18 meetings during the year
ended April 30, 1998. The Board of Directors has established a standing
Executive Committee, Compensation Committee, and an Audit Committee which held
one (1) meeting during the year ended April 30, 1998. Each incumbent director
attended at least seventy-five percent (75%) of the aggregate number of meetings
of the Board and Committees of which he was a member in the year ended April 30,
1998.

The Executive Committee was established in July 1998. The Executive
Committee is responsible for reviewing the performance of the Board and
management and for nominating individuals to serve as members of the Board of
Directors. The current members of the Executive Committee are Thomas R. Testman,
Rockell N. Hankin and Carmelo Santoro, Ph.D.

The Compensation Committee reviews programs in the areas of employee and
incentive compensation plans and the Company's Stock Option and Purchase Plans,
and reviews and makes recommendations to the Board of Directors with respect to
base salary adjustments and bonuses for all officers and other key personnel of
the Company. Edward J. Legere II and Carmelo J. Santoro were the members of the
Compensation Committee during the fiscal year ended April 30, 1998. In July
1998, the Compensation Committee added Rockell N. Hankin and Clive R. Taylor as
members. Rockell N. Hankin is Chairman of the Compensation Committee. Edward J.
Legere II resigned from the Compensation Committee effective with his
resignation from the Board of Directors on September 8, 1998.

The Audit Committee is responsible for recommending to the Board of
Directors the appointment of the Company's outside auditors, examining the
results of audits and quarterly reviews and reviewing internal accounting
controls. During the fiscal year ended April 30, 1998 the audit Committee
members were Edward J. Legere, II and Carmelo Santoro, Ph.D. In July 1998, the
Board changed the Audit Committee members to Edward J. Legere II and Thomas R.
Testman. Mr. Edward Legere resigned from the Audit Committee effective with his
resignation from the Board of Directors on September 8, 1998.

Special Committees are appointed periodically as special purpose committees
for various matters including, reviewing stockholder concerns and related party
transactions. Rockell N. Hankin, Thomas R. Testman and Larry O. Bymaster are
currently the members of Current Special Committees.

EXECUTIVE OFFICERS

Elizabeth A. Gorbett-Frost was appointed Chief Financial Officer of the
Company on March 23, 1998 and Secretary of the Company on June 3, 1998. From
August 1996 through March 1998, she served as Vice-President of Finance and
Administration for the Company. Prior to joining the Company, Ms. Gorbett-Frost
was a partner with the certified public accounting firm of Deloitte & Touche LLP
from 1979 to 1996, where

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<PAGE> 9

she most recently served as partner-in-charge of the life sciences industry
group. Ms. Gorbett-Frost also serves as a director of a privately held company.

William V. Moding has served the Company as Vice President of Operations
and Administration since March 23, 1998. He served as the Chief Financial
Officer of the Company from November 1983 to March 23, 1998, and is the former
Secretary of the Company. On October 1, 1996, Mr. Moding commenced full-time
employment with the Company. Mr. Moding was a director of the Company from March
1985 through October 1997. From 1979 to 1996 Mr. Moding was a partner in the
certified public accounting firm of Kanady & Moding. From 1975 to 1979, Mr.
Moding was a staff accountant with Deloitte & Touche LLP (formerly Deloitte,
Haskins & Sells). He has a Master's Degree in Business Taxation from the
University of Southern California.

DIRECTOR'S COMPENSATION

Directors who also are Company employees receive no compensation for
serving as directors. No compensation is paid for attending meetings of
Committees of the Board of Directors on which directors serve. Pursuant to the
Company's 1993 Employee Stock Option Plan ("1993 Plan"), each year, each
non-employee director is automatically granted an option to purchase 2,000
shares of Company Common Stock at an exercise price that is equal to the fair
market value of the shares on the date of grant. These options vest twenty
percent (20%) on the first anniversary of the date of grant and 1/60 of the
remaining amount each month thereafter. Pursuant to the Company's 1996 Stock
Incentive Plan ("1996 Plan"), each new director of the Company who is neither an
employee nor an executive officer of the Company is automatically granted a
Nonqualified Stock Option to purchase 10,000 shares of Common Stock upon
commencement of service as a non-employee director and a Nonqualified Option to
purchase 5,000 shares of Common Stock at the end of each fiscal year such
employee director has served at least six months during such fiscal year. These
option grants are granted at fair market value at date of grant and are
exercisable six months after the date of grant.

Under a separate agreement, during fiscal year 1997, the Company granted
Carmelo J. Santoro, Ph.D., as compensation for his services as a member of the
Board of Directors, a nonqualified option to purchase 250,000 shares of the
Company's Common Stock at $4.00 per share, which was the fair market value at
the date of grant. This option vests twenty-five percent (25%) on the date of
grant and twenty-five percent (25%) annually beginning June 30, 1997. Under this
agreement, Mr. Santoro waived his participation in the 1993 and 1996 Plans as a
non-employee director. The option was repriced to $.60 on March 2, 1998 in
conjunction with the repricing of stock options held by active employees,
consultants and directors. (See Report of Compensation Committee).

Under a separate agreement, during June 1998, the Company granted Thomas R.
Testman, as compensation for his services as a member of the Board of Directors
a nonqualified option to purchase 200,000 shares of the Company's Common Stock
at $1.59 per share, which was the fair market value at the date of grant. This
option vests twenty-five percent (25%) annually beginning June 3, 1999. Under
this agreement, Mr. Testman waived his participation in the 1993 and 1996 Plans
as a non-employee director. In addition, Mr. Testman served as interim CEO for
the Company during the period from March 1998 through May 1998 and during that
time was granted an incentive option to purchase 50,000 shares of the Company's
Common Stock at $.60 per share, which was the fair market value at the date of
grant. The option vested immediately and was exercised during July 1998. During
June 1998, the Company issued Mr. Testman 25,000 shares of the Company common
stock in exchange for consulting services to be rendered by Mr. Testman for the
three months ending August 31, 1998.

Under two separate option agreements in November 1997 and May 1998,
respectively, the Company granted Rockell N. Hankin, as compensation for his
services as a member of the Board of Directors, non-qualified options to
purchase 100,000 and 150,000 shares of the Company's Common Stock at $3.00 and
$1.59 per share, respectively, which were the fair market values at each date of
grant. These options vest twenty-five percent (25%) on the date of grant and
twenty-five percent (25%) annually thereafter. Under these agreements, Mr.
Hankin waived his participation in the 1993 and 1996 Plans as a non-employee
director. Options for 100,000 shares were repriced to $.60 per share on March 2,
1998 in conjunction with the repricing

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<PAGE> 10

of stock options held by active employees, consultants and directors. (See
Report of Compensation Committee).

Edward J. Legere II resigned from the Board of Directors of the Company on
September 8, 1998. During the five years ended April 30, 1998, Edward J. Legere
II was granted options under the formula grants for nonemployee directors and
was granted options to purchase a total of 20,000 shares of the Company's Common
Stock at prices ranging from $.70 and $4.63 per share, or the fair market value
at the date of grant. The options vest as described in the related stock
purchase plan documents. Options representing 15,000 shares were repriced to
$.60 per share on March 2, 1998 in conjunction with the repricing of stock
options held by active employees, consultants and directors. (See Report of
Compensation Committee). In addition, in April 1998, in conjunction with
providing the Company with access to a $2,000,000 line of credit with
Biotechnology Development, Ltd. (BTD), an affiliate of Mr. Legere, BTD was
granted a warrant to purchase 500,000 shares of the Company's common stock at
$1.00 per share.

Under a separate option agreement, in September 1998, the Company granted
Mr. William C. Shepherd, as compensation for his services as a member of the
Board of Directors, nonqualified options to purchase 250,000 shares of the
Company's common stock at the closing price of the Company's common stock on
September 8, 1998. The option vests twenty-five percent (25%) per year
beginning September 8, 1999. Under this agreement, Mr. Shepherd waived his
participation in the 1993 and 1996 Plans as a nonemployee director.

Under a separate option agreement, in August 1998, the Company granted
Clive R. Taylor, M.D., Ph.D., as compensation for his services as a member of
the Board of Directors and as a consultant to the Company, a nonqualified option
to purchase 150,000 shares of the Company's Common Stock at $1.41 per share,
which was the fair market value at the date of grant. Options for 75,000 shares
vest at twenty-five percent (25%) annually beginning August 3, 1999. The
remaining 75,000 vest based on the achievement of various milestones to be
determined at a future date. Under this agreement, Dr. Taylor waived his
participation in the 1993 and 1996 Plans as a non-employee director. In
addition, Dr. Taylor received $28,550 during fiscal year 1998 for scientific
professional fees.

Marc E. Lippman, M.D., resigned from the Board of Directors of the Company
on February 25, 1998. Prior to Mr. Lippman's resignation, under a separate
agreement, the Company agreed to grant Marc E. Lippman, M.D., as compensation
for his services as a member of the Board of Directors a nonqualified option to
purchase 100,000 shares of the Company's Common Stock at $3.85 per share, which
was the fair market value at the date of grant. This option vests twenty-five
percent (25%) on the date of grant and twenty-five percent (25%) annually
beginning October 27, 1998. Under this agreement, Dr. Lippman waived his
participation in the 1993 and 1996 Plans as a non-employee director. Dr. Lippman
did not exercise any shares granted as a member of the Board of Directors prior
to his resignation and all shares were canceled 90 days after his date of
resignation.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent (10%) stockholders are required by
regulations promulgated by the Securities and Exchange Commission to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on the
review of copies of such reports furnished to the Company and written
representations that no other reports were required, the Company believes that
during the fiscal year ended April 30, 1998, the Company's officers, directors
and all persons who own more than ten percent (10%) of a registered class of the
Company's equity securities complied with all Section 16(a) filing requirements,
with the following exceptions: Reports covering transactions during the fiscal
year ended April 30, 1998, were filed late by Rockell H. Hankin and Edward J.
Legere II and certain reports were initially erroneously filed stating that Ms.
Elizabeth A. Gorbett-Frost sold shares of the Company's common stock.
Subsequently, the reports were corrected to reflect the purchase rather than the
sale of common stock by Ms. Gorbett-Frost.

COMPENSATION OF EXECUTIVE OFFICERS

Larry O. Bymaster. On May 18, 1998, the Company entered into an Employment
Agreement with Mr. Larry O. Bymaster. The employment agreement provides that Mr.
Bymaster shall be employed as the Company's President and Chief Executive
Officer for a two (2) year period commencing May, 1998 at an annual base salary
of $250,000, subject to increases at the discretion of the Board of Directors.
At the end of each fiscal year, Mr. Bymaster is entitled to a bonus of up to
100% of his base salary as an incentive bonus.

8
<PAGE> 11

Mr. Bymaster's bonus will be based on performance targets established by the
Board of Directors. In addition, Mr. Bymaster was granted an option to purchase
1,250,000 shares of Common Stock at $1.41 per share, which was the fair market
value at the date of grant. This option vest twenty-five percent (25%) on the
date of grant and 250,000 shares on each of the next succeeding four
anniversaries of his employment date. Mr. Bymaster is also eligible for certain
fringe benefits offered by the Company's executive benefit plans. If Mr.
Bymaster is terminated for any reason, he will continue to receive his annual
base salary for one year.

Elizabeth A. Gorbett-Frost. Ms. Gorbett-Frost entered into an Employment
Agreement with the Company effective January 1, 1997. The Employment Agreement
provides for Ms. Gorbett-Frost to be employed for a twelve month period of time.
On the first of each month, the Employment Agreement is extended for an
additional one month period so that, at the beginning of each calendar month,
Ms. Gorbett-Frost has twelve (12) months remaining on her Employment Agreement.
Ms. Gorbett-Frost was initially paid a salary of $140,000 which, as a result of
her promotion to Chief Financial Officer and Corporate Secretary, was increased
to $175,000. Ms. Gorbett-Frost's salary is subject to increases at the
discretion of the Board of Directors and may, at the discretion of the Company's
Board of Directors, be paid a bonus. Ms. Gorbett-Frost is eligible for certain
fringe benefits offered by the Company. In the event of Ms. Gorbett-Frost's
termination as a result of disability or without cause, or following a change in
control as defined in the Employment Agreement, Ms. Gorbett-Frost shall receive
twelve (12) months of severance pay. In the event Ms. Gorbett-Frost's
termination as a result of death or non-performance of duties, Ms. Gorbett-Frost
shall be entitled to a severance payment equal to six (6) months salary, based
on the average monthly salary earned by her during the prior twelve (12) months.
Within ninety (90) days prior to or fifteen (15) months after a change in
control as defined in the Agreement, if either the Company elects to terminate
the Employment Agreement or Ms. Gorbett-Frost elects to resign, the Company
shall pay Ms. Gorbett-Frost's salary for a period of twelve (12) months
including the value of all perquisites during the twelve (12) month period
immediately preceeding the termination and, in addition, the Company shall vest
all of her stock options and issue the stock represented thereby, as additional
compensation. The Company shall also pay, as additional compensation, the
federal and state withholding tax due on the issuance of such stock at the bonus
rate to the federal and state taxing authorities.

William V. Moding. Mr. Moding entered into an Employment Agreement with the
Company effective as of January 1, 1997. The Employment Agreement provides for
Mr. Moding to be employed for twenty-four (24) months. On the first of each
month, the Employment Agreement is extended for an additional one month period
so that, at the beginning of each calendar month, Mr. Moding has twenty-four
(24) months remaining on his Employment Agreement. Mr. Moding's Employment
Agreement provides for an annual base salary of $200,000. During March 1998, Mr.
Moding agreed to defer $25,000 of his annual base salary until such time the
$15,000,000 in funding. Mr. Moding's salary is subject to increases at the
discretion of the Board of Directors and he may, at the discretion of the
Company's Board of Directors, be paid a bonus. Mr. Moding is eligible for all
fringe benefits offered by the Company. In the event of Mr. Moding's termination
as a result of disability or without cause, or within ninety (90) days prior to
or fifteen (15) months after a change in control as defined in the Employment
Agreement, if either the Company elects to terminate the Employment Agreement or
Mr. Moding elects to resign, the Company shall pay Mr. Moding's salary for a
period of twenty-four (24) months including the value of all perquisites during
the twelve (12) month period immediately preceeding the termination and in
addition, the Company shall vest all of his stock options and issue the stock
represented thereby as additional compensation. The Company shall also pay, as
additional compensation, the federal and state withholding tax due on the
issuance of such stock. In the event of Mr. Moding's termination as a result of
death or non-performance of duties, Mr. Moding shall be entitled to a severance
payment equal to six (6) months salary, based on the average monthly salary
earned by him during the prior twelve (12) months.

Jamie C. Oliver, Pharm.D. Dr. Oliver entered into an Employment Agreement
with the Company effective July 21, 1997. The Employment Agreement provides for
Dr. Oliver to be employed for twelve (12) months. On the first of each month,
the Employment Agreement is extended for an additional one-month period so that,
at the beginning of each calendar month, Dr. Oliver has twelve (12) months
remaining on his Employment Agreement. Dr. Oliver was initially paid a salary of
$160,000, plus a one-time signing bonus of

9
<PAGE> 12

$10,000, and was entitled to reimbursement of various moving expenses not to
exceed $10,500. In March 1998, as a result of Dr. Oliver's promotion to Vice
President of Clinical and Regulatory Affairs, his annual salary was increased to
$175,000. Dr. Oliver's salary is subject to increases at the discretion of the
Board of Directors and he may, at the discretion of the Company's Board of
Directors, be paid a bonus. Dr. Oliver is eligible for certain fringe benefits
offered by the Company. In the event of Dr. Oliver's termination without cause,
Dr. Oliver shall receive twelve (12) months of severance pay. In May 1998, Dr.
Oliver was granted a bonus, not to exceed $30,000, for reimbursement of current
and future legal fees related to a personal legal matter.

David R. Allen, Ph.D. Dr. Allen's services as an employee to Techniclone
were terminated effective July 15, 1998. At that time, the Company entered into
a consulting agreement with Dr. Allen, expiring in July 1999. Under the terms of
the consulting agreement, Dr. Allen will receive $10,000 per month through
January 15, 1999 and $500 per month for the period of January 16, 1999 through
July 15, 1999 for providing radiolabeling services to the Company. Options
granted and vested during his employment with the Company will expire ninety
(90) days after expiration of the consulting agreement. During fiscal year 1998,
Dr. Allen purchased 1,000 shares of the Company's common stock.

Kenneth Berger, Ph.D. Dr. Berger's services as an employee to Techniclone
were terminated effective March 15, 1998. At that time, the Company entered into
a termination agreement with Dr. Berger which provided for payment of $11,667
per month through July 13, 1998, in exchange for Dr. Berger providing regulatory
consulting services to the Company through July 13, 1998. Under the terms of the
termination agreement, options granted and vested during Dr. Berger's employment
with the Company will expire ninety (90) days after expiration of the
termination agreement.

Lon H. Stone. Effective on November 1, 1994, the Company entered into an
Employment Agreement with Lon H. Stone, then Chief Executive Officer of the
Company. The Employment Agreement, which would have expired on December 11,
2000, provided for an annual base salary of $250,000 plus an annual incentive
bonus at the discretion of the Board of Directors of the Company. Mr. Stone
resigned from his positions as Chief Executive Officer and Chairman of the Board
in 1998 and his Employment Agreement provided that, in such circumstances, the
Company pay an immediate cash severance benefit equal to twice the annual salary
rate, vest all unexercised outstanding stock options, and pay (issue) the option
stock at no cost to Mr. Stone, along with any applicable federal and state
payroll withholding taxes on the option stock. The Company did not have
sufficient cash resources to fulfill its obligations under that agreement.
Accordingly, at the direction of the Board of Directors, the Company negotiated
a new Severance Agreement with Mr. Stone to conserve its cash. The new Severance
Agreement provides for Mr. Stone to be paid $300,000 a year for the period
beginning March 1, 1998 through March 1, 2000. Unexercised and unvested
outstanding stock options on March 1, 1998, will vest and be paid (issued) as
follows: one-third of the unexercised, unvested options outstanding on March 1,
1998 will vest immediately and be paid to Mr. Stone on December 31, 1998; one-
third of the unexercised, unvested and outstanding options on March 1, 1998,
will vest on March 1, 1999 and be paid on December 31, 1999; and one-third of
the unexercised, unvested and outstanding options on March 1, 1998, will vest
and be paid on March 1, 2000. In addition, the Company will make appropriate tax
withholding payments to the appropriate taxing authorities. During the period
beginning on March 1, 1998 and ending on March 1, 2000, Mr. Stone will, with
certain exceptions, be eligible for Company benefits. Pursuant to the Severance
Agreement, Mr. Stone must be available to work for the Company for up to
twenty-five (25) hours per week. In addition, as part of Mr. Stone's agreement
to modify his existing severance package, the Company agreed that if Mr. Stone
does not compete with the Company during the period beginning March 1, 1998 and
ending February 29, 2000, the Company will, on March 1, 2000, pay Mr. Stone an
amount equal to his Note of $350,000, plus all accrued interest thereon. The
proceeds of which will then be used to retire the note receivable plus accrued
interest.

10
<PAGE> 13

The following table sets forth the compensation earned by the former Chief
Executive Officer, the former interim Chief Executive Officer, three officers
whose compensation for the 1998 fiscal year was in excess of $100,000 and two
former officers of the Company whose compensation exceeded $100,000 for the 1998
fiscal year, for services rendered in all capacities to the Company for each of
the last three fiscal years. All the individuals named in the table will
hereinafter be referred to as the "Named Officers."

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARD
ANNUAL COMPENSATION ---------------------------------
--------------------------- OTHER SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS COMPENSATION UNDERLYING OPTIONS
--------------------------- ---- ------------ ----- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Lon H. Stone............................. 1998 $257,692 $-- $41,025(2) --
Former Chairman of the Board 1997 $207,000 $-- (4) 400,000
and Chief Executive Officer 1996 $162,000 $-- (4) 200,000
Thomas R. Testman........................ 1998 $ 46,154 $-- (4) 50,000
Former Interim Chief Executive Officer
Elizabeth A. Gorbett-Frost............... 1998 $144,039 $-- (4) --
Chief Financial Officer and Secretary 1997 $ 79,052 $-- (4) 160,000
William V. Moding........................ 1998 $197,115 $-- $43,607(3) --
Vice President, 1997 $ 92,192 $-- (4) --
Operations & Administration 1996 $ -- $-- (4) 320,000
Jamie C. Oliver, Pharm.D................. 1998 $137,885 $-- (4) 100,000
Vice President, Clinical and
Regulatory Affairs
David R. Allen, Ph.D..................... 1998 $196,058 $-- (4) --
Former Vice President, 1997 $ 37,019 $-- (4) 125,000
Radiopharmaceuticals 1996 $ -- $-- (4) 15,000
Kenneth L. Berger, Ph.D.................. 1998 $157,898 $-- (4) --
Former Vice President, 1997 $100,337 $-- (4) 35,000
Regulatory Affairs 1996 $ 92,563 $-- (4) 75,000
</TABLE>

- ---------------
(1) Salary information is reported as of the last payroll paid prior to or
immediately after April 30th of each year. Includes amounts deferred under
the Company's 401-K Plan.

(2) Primarily includes $26,000 paid as reimbursement for life insurance premiums
and $9,600 paid for reimbursement of automobile expense.

(3) Primarily includes $23,100 paid as reimbursement for life insurance premiums
and $15,000 paid for reimbursement of automobile expense.

(4) Amounts were not significant enough to meet requirements of disclosure.

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information on option grants in the year ended
April 30, 1998 to the Named Officers.

<TABLE>
<CAPTION>
NUMBER OF PERCENT
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT
OPTIONS ALL EMPLOYEES IN PRICE EXPIRATION DATE
NAME GRANT DATE GRANTED FISCAL YEAR(1) ($/SHARE)(2) DATE VALUE
---- ---------- ---------- ---------------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Jamie C. Oliver, Pharm.D.... 07/16/97 100,000 12.55% $0.60 07/16/07 $35,970
Thomas R. Testman........... 03/01/98 50,000 6.27% $0.60 03/01/08 $17,985
</TABLE>

- ---------------
(1) Options to purchase an aggregate of 796,909 shares were granted to all
employees, directors and consultants in the year ended April 30, 1998,
including the Named Officers under the Company's 1993 Employee Stock Option
and 1996 Stock Incentive Plan.

11
<PAGE> 14

(2) The exercise price may be paid in cash, or shares of the Company's Common
Stock valued at fair market value on the date of exercise. All options were
issued or repriced for an exercise price at least equal to fair market value
on the date of grant or date of repricing (See Report of Compensation
Committee). Fair market value is the closing price of the Company's Common
Stock on the date of grant.

OPTION EXERCISES AND FISCAL YEAR-END VALUES

The following table provides information on option exercises in the year
ended April 30, 1998, by the Named Officers and the value of unexercised options
held by the Named Officers as of April 30, 1998.

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT OPTIONS
SHARES APRIL 30, 1998 AT APRIL 30, 1998(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David R. Allen, Ph.D........... -- -- 55,000 85,000 $ 38,500 $ 59,500
Kenneth L. Berger, Ph.D........ -- -- 151,250 -- $105,875 $ --
Elizabeth A. Gorbett-Frost..... -- -- 66,667 93,333 $ 46,667 $ 65,333
William V. Moding.............. -- -- 160,000 160,000 $112,000 $112,000
Jamie C. Oliver, Ph.D.......... -- -- -- 100,000 $ -- $ 70,000
Lon H. Stone................... -- -- 822,333 166,667 $575,633 $116,667
Thomas R. Testman.............. -- -- 50,000 -- $ 35,000 $ --
</TABLE>

- ---------------
(1) The closing price of the Company's Common Stock on April 30, 1998 on NASDAQ
was $.70.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER TRADING

The following non-employee directors serve on the Compensation Committee of
the Board of Directors: Rockell N. Hankin, Chairman, Carmelo J. Santoro, Ph.D.
and Clive R. Taylor, M.D., Larry O. Bymaster, the Company's President and Chief
Executive Officer, is an ex-official member of the Compensation Committee. Such
ex-official status does not entitle him to vote on matters submitted to the
Compensation Committee. There are no interlocks of executive officers or board
members of the Company serving on the compensation committee or equivalent
committee of another entity which has any director or executive officer serving
on the Compensation Committee, other committees or Board of Directors of the
Company.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee is a standing committee of the Board of
Directors of the Company. Carmelo J. Santoro and Edward J. Legere II were the
members of the Compensation Committee during the fiscal year ended April 30,
1998. On July 27, 1998, Mr. Rockell N. Hankin and Clive R. Taylor, non-employee
directors of the Company were added to the Committee and Mr. Edward J. Legere II
resigned from the Committee on September 8, 1998, in conjunction with his
resignation as a member of the Board of Directors. The Compensation Committee is
responsible for adopting and evaluating the effectiveness of compensation
policies and programs for the Company and for making determinations regarding
the compensation of the Company's executive officers, subject to review by the
full Board of Directors.

The following report is submitted by the members of the Compensation
Committee with respect to the executive compensation policies established by the
Compensation Committee and compensation paid or awarded to executive officers
for the year ended April 30, 1998.

Compensation Policies and Objectives. The Compensation Committee determines
the Chief Executive Officer's compensation and the compensation of all executive
officers by taking into consideration (i) what other chief executive officers
and executive officers in the industry receive as compensation, (ii) the
liquidity position of the Company, (iii) what the Company can afford to pay and
(iv) available alternative sources of compensation such as incentive stock
options. As the Company has a history of operating losses, no specific

12
<PAGE> 15

relationship of the Company's financial performance was used in determining the
executive officer's compensation. The Compensation Committee took into
consideration the compensation of executive officers of similar companies within
the industry for consideration of executive salaries. In addition, the Board
utilized the J. Robert Scott, Coopers & Lybrand Executive Salary Survey in
making its decision with respect to the Chief Executive Officer's compensation.
While the Compensation Committee considers the salary of other executive
officers in the industry important in the consideration of its decision with
respect to the executive officer's compensation, the controlling factors were
the liquidity of the Company and compensation requirements to recruit and retain
the necessary officers. None of the other executive officers of the Company
receive compensation for fulfilling their duties as officers.

Stock Options and Equity-Based Programs. In order to align the financial
interests of executive officers and other key employees with those of the
stockholders, the Company grants stock options to its directors, executive
officers and other key employees on a periodic basis. Moreover, the Compensation
Committee generally has followed the practice of granting options on terms which
provide that the options become exercisable in cumulative annual installments,
generally over a three to four year period. The Compensation Committee believes
that these features of the option grants not only provide an incentive for
directors to serve the Company and for executive officers and other key
employees to remain in the employ of the Company, but also make the Company's
earnings performance and longer term growth in share prices important for the
executives who receive stock options.

Stock Option Plans. The Company has five stock option plans, (i) the 1982
Stock Option Plan (the "1982 Plan"), (ii) the Incentive Stock Option,
Nonstatutory Stock Option and Restricted Stock Purchase Plan -- 1986 (the "1986
Plan"), (iii) Incentive Stock Option and Nonqualified Stock Option Plan -- 1993
(the "1993 Plan"), (iv) the Cancer Biologics Incorporated, Incentive Stock
Option, Nonqualified Stock Option and Restricted Stock Purchase Plan -- 1987
(the "CBI Plan") and (v) the 1996 Stock Incentive Plan (the "1996 Plan"). The
purpose of the Plans is to enable the Company to attract and retain directors,
employees and consultants of ability and to motivate such persons to use their
best efforts on behalf of the Company and its subsidiaries by providing them
with equity participation in the Company. Pursuant to the 1982 Plan, 450,000
shares of Common Stock were reserved for issuance upon the exercise of options
granted to key officers, directors, consultants and employees. Pursuant to the
1986 Plan, 500,000 shares of Common Stock were reserved for issuance upon the
exercise of options granted to key employees, officers and directors of the
Company. Pursuant to the CBI Plan, 2,000,000 shares of Common Stock were
reserved for issuance upon exercise of options. Pursuant to the 1993 Plan,
750,000 shares of Common Stock are reserved for issuance upon the exercise of
options to directors, employees and consultants of the Company. Pursuant to the
1996 Plan, upon approval of the Plan, 4,000,000 shares of Common Stock were
initially reserved for issuance upon the exercise of options. In addition, the
shares reserved for issuance under the 1996 Plan are automatically increased at
the end of each fiscal year by twenty percent (20%) of any increase (other than
any increase due to stock awards under any of the Plans) in the number of
authorized and issued shares above 20,869,675 (the number of authorized and
issued shares at September 27, 1996). At April 30, 1998, the number of shares
for which options may be granted under the 1996 Plan increased to 9,432,862.
Certain options granted under the 1986 Plan, the 1982 Plan, the CBI Plan, the
1993 Plan and the 1996 Plan are intended to qualify as "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code of 1986. At
April 30, 1998, stock options to purchase 444,000 shares had been granted under
the 1982 Plan, of which none remain outstanding, stock options to purchase
486,000 shares had been granted under the 1986 Plan, of which 310,000 shares
remain outstanding, stock options to purchase 1,972,000 shares had been granted
under the CBI Plan and assumed by the Company, of which 806,000 shares remain
outstanding, stock options to purchase 721,205 shares had been granted under the
1993 Plan, of which 512,500 shares remain outstanding and stock options to
purchase 3,519,909 shares had been granted under the 1996 Plan, of which
2,848,826 shares remain outstanding. The 1982, 1986 and CBI Plans have been
terminated by the Board of Directors with respect to the grant of additional
options under such Plans. The CBI Plan was assumed by the Company in connection
with the merger of Cancer Biologics Incorporated with and into the Company.

During the fourth quarter of the fiscal year ended April 30, 1998, the
Company restructured its business operations, and in an effort to conserve its
cash resources, terminated several employees. During this period of

13
<PAGE> 16

time, the stock price of the Company declined dramatically and there was minimal
incentive for the remaining employees to remain with the Company, as the
incentive options they had been granted were priced well in excess of the fair
value of the Company's common stock and as the financial position of the Company
was precarious and its survival was uncertain. As such, the Board of Directors
authorized the repricing of all outstanding stock options for active employees,
consultants and directors. The Board of Directors approved the repricing because
it believes that equity interests are a significant factor in the Company's
ability to retain directors, executive officers and employees, by providing an
incentive to all optionees to devote their utmost effort and skill to the
advancement and betterment of the Company by permitting them to participate in
the success and increased value of the Company. As a result of the termination
of several of the Company's employees, the decline in the Company's stock price,
the Company's precarious financial position and the decline in the morale of its
personnel, the Compensation Committee and the Board of Directors believed that
in order to retain the active key employees, consultants to the Company and
non-employee directors, the Company was required to reprice the exercise price
of all outstanding stock options to the then current market value of $.60.
Accordingly, on March 2, 1998, the Board of Directors approved the repricing of
3,219,659 options granted pursuant to the Company's 1986, 1993 and 1996 Stock
Option Plans, including an aggregate of 1,521,250 options granted to the Named
Officers, and an aggregate of 685,000 options granted to members of the Board of
Directors. Such repricing was effected by offering to exchange new options with
an exercise price of $.60 per share for the options then held by such optionees.
The repricing was effective immediately.

The 1982, 1986, CBI Plan, 1993 and 1996 Plans are administered by the
Compensation Committee which determines the terms of options granted under the
Plans, including the exercise or purchase price, conditions of purchase
(including repurchase rights in favor of the Company), number of shares subject
to the option or right and the exercisability thereof. Except with respect to
the 1996 Plan, the exercise price of all options granted under the Plans must be
at least equal to the fair market value of such shares on the date of grant. The
maximum term of each option is ten years.

No options were granted to or exercised by officers or directors during the
year ended April 30, 1998, under the 1982 Plan.

No options were granted or exercised by officers or directors during the
year ended April 30, 1998, under the 1986 Plan. Options to purchase 310,000
shares are outstanding under the 1986 Plan, all of which were exercisable as of
April 30, 1998. Options outstanding under the 1986 Plan expire at various dates
through 2003.

No options were granted or exercised by officers or directors during the
year ended April 30, 1998, under the CBI Plan. Options to purchase 806,000
shares are outstanding under the CBI Plan, all of which were exercisable as of
April 30, 1998. Options outstanding under the CBI Plan expire in 2003.

No options were exercised by officers or directors during the year ended
April 30, 1998, under the Company's 1993 Plan. During the year ended April 30,
1998, R.C. Shepard and Edward J. Legere II were granted "formula grants" under
the 1993 Plan to purchase 2,000 shares of Common Stock of the Company. Mr.
Shepard did not stand for re-election as a director at the 1997 annual meeting
and his options expired unexercised. These grants vest twenty percent (20%) on
the first anniversary of the date of grant and 1/60 of the remaining amount each
month thereafter. Options to purchase 512,500 shares are outstanding under the
1993 Plan. Options outstanding under the 1993 Plan expire at various dates
through 2007.

No options were exercised by officers or directors during the year ended
April 30, 1998 under the 1996 Plan. During the year ended April 30, 1998, Dr.
Jamie Oliver, Vice President of Clinical and Regulatory Affairs, was granted an
option to purchase 100,000 shares under the 1996 Plan. Stock options granted to
Dr. Oliver vest twenty-five percent (25%) beginning in July 1998 and twenty-five
percent (25%) annually thereafter. Thomas R. Testman, former Interim Chief
Executive Officer, was granted an option to purchase 50,000 shares under the
1996 Plan. Stock options granted to Mr. Testman vested on the date of grant
(March 1, 1998). As of April 30, 1998 options to purchase an aggregate of
2,848,826 shares were outstanding under the 1996 Plan, of which 967,751 were
exercisable.

14
<PAGE> 17

On January 17, 1997, the Company loaned Lon H. Stone, former Chairman of
the Board of Directors and former Chief Executive Officer of the Company,
$350,000 pursuant to a Promissory Note. The highest loan balance during the year
ended April 30, 1998, was $381,464 which included principal and accrued
interest. The purpose of the loan was to provide Mr. Stone with the additional
cash necessary to purchase a new residence. The Board of Directors, including
the Compensation Committee, determined that the loan was in the best interests
of the Company and, with Lon Stone abstaining, unanimously approved it. The Note
is collateralized by real estate and bears interest at seven percent (7%) per
annum. The original Note and interest thereon were due and payable on January
31, 2000. In conjunction with the renegotiation of a new Severance Agreement
with Mr. Stone, the Company agreed that if Mr. Stone did not compete with the
Company during the period beginning March 1, 1998 through February 29, 2000, the
Company would, on March 1, 2000, pay Mr. Stone an amount equal to this Note of
$350,000 plus all accrued interest thereon, the proceeds of which will then be
used to retire the Note.

On April 30, 1997, the Company requested that Mr. Moding exchange $203,500
of non-interest bearing outstanding notes which Mr. Moding had executed and
delivered to the Company, to pay for options exercised under the Company's stock
option plans. The Company's option plans, which have been approved by
stockholders, provide that a purchaser's promissory note may be used to exercise
options. The original notes were executed and delivered by Mr. Moding in
connection with the exercise of options. At the Company's request, Mr. Moding
agreed to, and did exchange two non-interest bearing notes with maturity dates
at April 30, 1999, for two new notes aggregating $203,500. The notes are secured
by both personal assets of Mr. Moding and 204,000 shares of the common stock of
the Company held by Mr. Moding. The new notes bear interest at six percent (6%)
per annum and are payable in seven (7) equal annual installments beginning April
30, 1998. On April 29, 1998, the first annual installment of $36,672, including
principal and interest, was made and the remaining principal balance at April
30, 1998, was $179,379.

On April 30, 1997, the Company requested that Mr. Shepard, a previous
director of the Company, exchange $203,083 of non-interest bearing outstanding
notes which Mr. Shepard had executed and delivered to the Company, to pay for
options exercised under the Company's stock option plans. The Company's option
plans, which have been approved by stockholders, provide that a purchaser's
promissory note may be used to exercise options. The original notes were
executed and delivered by Mr. Shepard in connection with the exercise of
options. At the Company's request, Mr. Shepard agreed to, and did exchange two
non-interest bearing notes with maturity dates at April 30, 1999, for two new
notes aggregating $203,083. The notes are secured by both personal assets of Mr.
Shepard and 203,000 shares of the common stock of the Company held by Mr.
Shepard. The new notes bear interest at six percent (6%) per annum and are
payable in seven (7) equal annual installments beginning April 30, 1998. On
April 29, 1998, the first annual installment of $36,596, including principal and
interest, was made and the remaining principal balance at April 30, 1998, was
$179,011.

In April 1998, through a private placement, the Company sold 1,120,065
shares of restricted common stock for proceeds of $625,000. Of the restricted
shares issued, 84,034 shares were sold to Elizabeth A. Gorbett-Frost on equal or
less favorable terms than the other participants in the offering. In conjunction
with the private placement, the Company granted warrants to purchase 280,015
shares of its common stock at $1.00 per share, of which 21,008 warrants were
granted to Ms. Gorbett-Frost. The warrants expire in April 2001.

In April 1998, the Company entered into a line of credit commitment with
BTD, an entity controlled by Mr. Legere. The line of credit commitment with BTD
provided for borrowings of up to $2,000,000 under a line of credit that expired
on May 31, 1998. Under the terms of the agreement, even though the Company did
not borrow under the agreement, the Company issued BTD a warrant to purchase
500,000 shares of the Company's common stock for $1.00 per share.

15
<PAGE> 18

COMPANY PERFORMANCE

The following graph shows a comparison of cumulative total returns for the
Company, Nasdaq Market Index and Nasdaq Peer group for the period that commenced
on April 30, 1993 and ended April 30, 1998.

COMPARISON OF CUMULATIVE TOTAL RETURNS

(NASDAQ MARKET INDEX)

Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report, and
the performance graph below, shall not be incorporated by reference into any
such filings.

<TABLE>
<CAPTION>
Techniclone Nasdaq Market
Corporation SIC Code Index Index
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 109.28 95.55 112.24
1995 45.50 120.01 122.56
1996 227.86 203.42 171.08
1997 172.06 179.62 182.36
1998 26.04 222.56 270.85
</TABLE>

The total cumulative returns on investment shown for the Company, the
Nasdaq Market Index and Peer Group Index are based on the assumptions that on
May 1, 1993, $100 was invested in the Company's Common Stock and in each Index
and that all dividends were reinvested.

The Peer Group chosen were companies in the Nasdaq Market Index with the
Standard Industrial Classification Code 2836 (Biological Products, except
diagnostic substances). The Peer Group included the following issuers: Advanced
Tissue Sciences, Alfacell Corporation, AMBI, Inc., American Biogenetic Sciences,
Amgen Inc., Anergen Inc., Anika Therapeutics, Inc., Aphton Corp., Ariad
Pharmaceuticals, Autoimmune Inc., Avax Technologies, Inc., Aviron, Biocryst
Pharmaceuticals, Biogen Inc., Biomatrix Inc., Biomira Inc., Biotime Inc.,
Cel-Sci Corp., Cerus Corporation, Chrysalis International Corp., Corixa
Corporation, Creative Biomolecules, Cryolife, Inc., Cypress Bioscience, Inc.,
Cytotherapeutics Inc., Cytrx Corporation, Diacrin Inc., Discovery Labs, Inc.,
Embrex Inc., Enzon Inc., Galagen, Inc., Genmedicine, Inc., Genta Incorporated,
Genzyme Corp., Genzyme Tissue Reproduction, Genzyme Transgenics Corp., Gilead
Sciences Inc., Gliatech, Inc., Heska Corporation, Idec Pharmaceuticals CP, IGI
Inc., Imclone Systems Inc., Immune Response Corp., Immunex Corp., Integra
Lifesciences CP, Interferon Sciences, Inc., La Jolla Pharmaceutical, Lifecore
Biomedical Inc., LXR Biotechnology Inc., Magainin Pharmaceuticals, Martek
Biosciences Corp., Medarex Inc., Medimmune Inc., Nabi Inc., Neurex Corp., North
American Vaccine, Northfield Laboratories, NovaVax Inc., NPS Pharmaceuticals,
NYER Medical Group, Inc., Onyx Pharmaceuticals, Inc., Oravax, Inc., Oxigene
Inc., Procept Inc., Progen Inductries, Ltd., Progenitor Inc.,

16
<PAGE> 19

Protein Design Labs Inc., Quigen NV, Repligen Corp., Ribi Immunochem Res Inc.,
Sangstat Medical Corp., Senetek Plc Adr, Serologicals Corp., Sparta
Pharmaceuticals, Sugen, Inc., Symbollon CP CLA, Targeted Genetics CP, Techne
Corp., Texas Biotechnology Corp., Titan Pharmaceutical Inc., Transcend
Therapeutics, TransKaryotic Therapies, Trega Biosciences, Inc., Vical Inc., Vion
Pharmaceuticals, Viragen (Europe) LTD, Viragen, Inc., Virus Research Institute
and Zonagen Inc. Management believes that an actual Peer Group for the Company
would be difficult to identify because the Company is a development stage
research and development Company with a limited operating history.

PROPOSAL TWO

APPROVAL OF ISSUANCE OF SHARES UNDER THE EQUITY LINE

INTRODUCTION

For the reasons set forth below, the Board of Directors believes that the
best interest of the Company and its stockholders will be served by approving
the issuance of the full number of shares of Common Stock which would be
issuable under the Common Stock Equity Line Subscription Agreement ("Equity
Line") to the extent that such issuance could result in the Company issuing more
than 20% of the issued and outstanding Common Stock of the Company as of August
7, 1998.

In June 1998, the Company secured access to a $20,000,000 Equity Line with
two institutional investors, expiring in June 2001. Under the terms of the
Equity Line, the Company may, in its sole discretion, and subject to certain
restrictions, periodically sell ("Put") shares of the Company's common stock for
up to $20,000,000 upon the effective registration for resale of the Put shares.
After effective registration of the Put shares, unless an increase is otherwise
agreed to, $2,250,000 of Puts can be made every quarter, subject to share
issuance volume limitations identical to those set forth in Rule 144(e). At the
time of each Put, the investors will be issued a warrant, expiring on December
31, 2004, to purchase up to 10% of the amount of common stock issued to the
investor at the same price at the time of the Put.

The Equity Line provides for immediate funding of $3,500,000 in exchange
for 2,545,454 shares of common stock (Equity Line Shares) and the issuance of a
warrant, expiring on December 31, 2004, to purchase 254,546 shares of Common
Stock at an exercise price of $1.375. One-half of this amount is subject to
adjustment at three months after the effective date of this Registration
Statement with the second half subject to adjustment six months after such
effective date of this Registration Statement. At each adjustment date, if the
market price ("Adjustment Price") is less than the initial price paid for the
Equity Line Shares, the Company will be required to issue additional Equity Line
Shares equal to the difference between the amount of shares which were issued
and the number which would have been issued by dividing $1,750,000 by the
Adjustment Price. Future Puts under the Equity Line will be priced at a 15%
discount on the 10 day low closing bid price. In addition, on June 16 of each of
the next three years, the Company is obligated to issue a warrant to the
investors to purchase a number of shares of Common Stock equal to 10% of an
amount equal to the difference of the relevant minimum commitment amount
($6,666,667 for 1999, $13,333,333 for 2000 and $20,000,000 for 2001) minus the
aggregate amount of Common Stock sold to the investors during all years
preceding June 16 of such year, divided by the 10 day low closing bid price of
the Common Stock on such date, at an exercise price equal to the 10 day low
closing bid price of the Common Stock on such date. All of the Equity Line
Shares and related Warrants issued are registerable shares.

To obtain strategic funding for the Company as it continues its clinical
trial programs, the Company entered into the Equity Line agreement. To continue
its clinical trial programs, the Company will be required to draw additional
amounts under the Equity Line or obtain additional financing through a licensing
or partnering arrangement for one or more of its technologies, or through
additional equity financings or issuance of debt.

For companies listed on the Nasdaq Stock Market, the National Associated of
Securities Dealers, Inc., requires stockholder approval, if the listed company
issues more than 20% of the Company's outstanding shares of common stock and
voting power in connection with a transaction (the "Cap Amount"). At the
effective date of the Equity Line, the Company did not issue more than 20% of
its outstanding Common Stock

17
<PAGE> 20

and does not expect that it will be required to do so in the future as it
relates to the immediate funding or subsequent Puts. However, should the Company
be unable to obtain alternative sources of financing and should the Company's
price of its Common Stock decline significantly at about the same time it needed
to draw on the Equity Line, the Put of additional amounts to the investors in
the Equity Line may result in the issuance by the Company of more than 20% of
the Company's outstanding Common Stock. Access to funds either through the
Equity Line, a licensing or partnering arrangement, additional equity financings
and or the issuance of debt are required for the Company to continue its
operations.

VOTE REQUIRED FOR THE APPROVAL OF ISSUANCE OF COMMON STOCK IN CONNECTION WITH
THE EQUITY LINE

The affirmative vote of the holders of a majority of the outstanding shares
of the Company entitled to vote will be required for approval of the issuance of
Common Stock in excess of 20% of the outstanding shares, in connection with the
Equity Line. The affirmative vote of the holders of a majority of the shares
present or represented by proxy and entitled to vote at the Annual Meeting on
this proposal will constitute approval of such issuance in connection with the
Equity Line. Accordingly, abstentions and broker non-votes will have the same
effect as votes against the proposal. Proxies solicited by management will be
voted FOR approval of the issuance in connection with the Equity Line.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL, FOR THE PURPOSES
OF THE CORPORATE GOVERNANCE REQUIREMENTS OF THE NASDAQ STOCK MARKET'S NATIONAL
MARKET, OF THE ISSUANCE OF COMMON STOCK OF THE COMPANY TO THE EXTENT SUCH
ISSUANCE COULD RESULT IN THE COMPANY ISSUING MORE THAN TWENTY PERCENT (20%) OF
THE ISSUED AND OUTSTANDING COMMON STOCK OF THE COMPANY AS OF AUGUST 7, 1998 IN
CONNECTION WITH THE $20,000,000 EQUITY LINE.

PROPOSAL THREE

RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS

The Board of Directors has selected Deloitte & Touche LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal year ending April 30, 1999, and recommends that stockholders vote for
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.

Deloitte & Touche LLP has been the Company's auditors since the Company's
inception. Representatives of Deloitte & Touche are expected to be present at
the meeting with the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.

In the Company's two most recent fiscal years, there have been no
disagreements between the Company and Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.

The audit report of Deloitte & Touche LLP on the Company's consolidated
financial statements for the fiscal years ended April 30, 1996, April 30, 1997
and April 30, 1998 contained no adverse opinion or disclaimer of opinion.

ANNUAL REPORT TO STOCKHOLDERS

The Annual Report to Stockholders of the Company for the fiscal year ended
April 30, 1998, including audited consolidated financial statements, has been
mailed to the stockholders concurrently herewith, but such report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.

18
<PAGE> 21

ANNUAL REPORT ON FORM 10-K

A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished by
first class mail, within one business day of receipt of request, without charge
to any person from whom the accompanying proxy is solicited upon written request
to Techniclone Corporation, Attention: Investor Relations, 14282 Franklin
Avenue, Tustin, California 92780-7017. If Exhibit copies are requested, a
copying charge of $.20 per page will be made.

STOCKHOLDER PROPOSALS

Pursuant to Regulation 14a-8 of the Securities and Exchange Commission,
proposals by stockholders which are intended for inclusion in the Company's
proxy statement and proxy to be presented at the Company's next annual meeting
must be received by the Company by May 11, 1999, in order to be considered for
inclusion in the Company's proxy materials. Such proposals shall be addressed to
the Company's Secretary and may be included in next year's proxy materials if
they comply with certain rules and regulations of the Securities and Exchange
Commission governing stockholder proposals. For all other proposals by
stockholders to be timely, a stockholder's notice must be delivered to, or
mailed and received at, the principal executive offices of the Company not later
than July 25, 1999. If a stockholder fails to so notify the Company of any such
proposal prior to such date, management of the Company will be allowed to use
their discretionary voting authority with respect to proxies held by management
when the proposal is raised at the annual meeting (without any discussion of the
matter in the Company's proxy statement).

OTHER MATTERS

The Management of the Company does not know of any other matters which are
to be presented for action at the Meeting. Should any other matters come before
the Meeting or any adjournment thereof, the persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their judgment.

By Order of the Board of Directors

Elizabeth A. Gorbett-Frost
Secretary

August 17, 1998

19
<PAGE> 22

TECHNICLONE CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 13, 1998

The undersigned hereby appoints Thomas R. Testman and Larry O. Bymaster, and
each of them, individually, the attorney, agent and proxy of the undersigned,
each with the power to appoint his substitute, to represent and vote, as
designated below, all shares of Common Stock of Techniclone Corporation held of
record by the undersigned on September 2, 1998, at the Annual Meeting of
Stockholders to be held at The Atrium Hotel, located at 18700 MacArthur
Boulevard, Irvine, California 92612 on October 13, 1998, at 10:30 a.m., Pacific
Time, and at any and all adjournments thereof.

1. ELECTION OF DIRECTORS:

<TABLE>
<S> <C>
[ ] FOR [ ] WITHHOLD AUTHORITY
the election of all nominees listed below to vote for any nominee listed below.
(except as marked to the contrary below)
</TABLE>

Thomas R. Testman, Larry O. Bymaster, Rockell N. Hankin, William C. Shepherd,
Clive Taylor, M.D., Ph.D. and Carmelo J. Santoro, Ph.D.

- --------------------------------------------------------------------------------

2. Approval of issuance of Common Stock pursuant to a $20,000,000 equity-based
line of credit, to the extent such issuance could result in the Company's
issuing more than twenty (20%) percent of the issued and outstanding Common
Stock of the Company as of September 2, 1998.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. Ratification of the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ended April 30, 1999.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 23

This Proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted FOR Proposals 1, 2 and 3.

Name:_________________________

Common Shares:________________

Dated: _________________, 1998

______________________________
Signature

______________________________
Signature if held
jointly

Please sign exactly as name
appears hereon. When shares
are held by joint tenants,
both should sign. When signing
as attorney, as executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.